Why We Are Debating Free

The answer’s easy: it does­n’t work for music. Unless you were liv­ing under a rock on Fri­day, you prob­a­bly read Techcrunch’s post, “The Sor­ry State of Music Star­tups.” With­out going into great detail, Arring­ton’s com­plete­ly right, and for once, he does­n’t resort to the whole “music just wants to be free” argu­ment so com­mon among Web 2.0 types. Instead, he writes that “free stream­ing music” is about as sen­si­ble as try­ing to douse a burn­ing pile of mon­ey with a gal­lon of gasoline.

With all due respect to Bruce Houghton at Hype­bot and Andrew Dub­ber at New Music Strate­gies, the dream is over. It’s time to wake up and smell the coffee.

Bruce’s post “Why Are We Still Debat­ing Free?” infu­ri­at­ed me. Sure, Chris Ander­son­’s notion of “freemi­um” sounds great for any web­site look­ing to get users to come back often to con­sume con­tent, but look at the body count pil­ing up in Music 2.0 and tell me how that looks. It’s not tru­ly “freemi­um” because they don’t own the good in ques­tion to begin with. Andrew Dub­ber incor­rect­ly states that “Yes, Google gives their con­sumer-fac­ing stuff away, and they are a mas­sive­ly suc­cess­ful com­pa­ny.” Google owns search on the web. They’re not giv­ing that away. They have a near monop­oly on the most potent rev­enue stream on the web!

Those of us who work very hard on the edi­to­r­i­al side, espe­cial­ly on the web, know just how dif­fi­cult it is to get peo­ple excit­ed about music these days. There are times you can’t give the stuff away! For all the talk about bands as brands and what-not, I can say hon­est­ly that music may have nev­er been a small­er part of the over­all enter­tain­ment pic­ture than it is today. Sure, music may be ubiq­ui­tous in com­mer­cials, on our iPods, and wher­ev­er else it lives, but that does­n’t mean peo­ple are active­ly seek­ing it out in any mean­ing­ful way. 

The music busi­ness has changed and so have music con­sumers. Now that music can be had for next to noth­ing, con­sumers are will­ing to accept what­ev­er low-qual­i­ty prod­uct is avail­able online and see no incen­tive to upgrade. The same is true in any oth­er busi­ness that’s been affect­ed by the Inter­net. It pains me to say it, but there may be no future what­so­ev­er for music as a busi­ness in its own right. The only thing these busi­ness­es can real­ly sell are t‑shirts! How can a strat­e­gy around “freemi­um” work when con­sumers are already acquir­ing the good for free or near­ly free? 

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19 responses to “Why We Are Debating Free”

  1. Dubber Avatar
    Dubber

    Not wish­ing to take any­thing away from your point about dom­i­nant his­tor­i­cal approach­es to record­ed music busi­ness being essen­tial­ly unsus­tain­able, but to clar­i­fy the Google example: 

    Go search for some­thing on Google. Do they charge you mon­ey to do so? If not, the val­ue you just received was free to you. The fact that Google have a very suc­cess­ful mod­el of mon­etis­ing that trans­ac­tion does not mean it was­n’t free to the consumer.

    It sur­pris­es me that so many peo­ple find this part of Ander­son­’s the­sis so dif­fi­cult to understand. 

    Your response to my ‘Google gives their con­sumer-fac­ing stuff away’ seems to be ‘Aha! But they make mon­ey at it, so it isn’t free.’ 

    Free does­n’t mean ‘does­n’t make mon­ey’. Obvi­ous­ly. It’s not the busi­ness mod­el, it’s the strat­e­gy that makes the busi­ness mod­el work.

    How much mon­ey would Google make, do you think, if instead of being free, they charged you as a con­sumer 10 cents per search? 

    Search is the free, con­sumer-fac­ing activ­i­ty that is the basis on which Google makes a very tidy B2B oper­a­tion incred­i­bly suc­cess­ful. Busi­ness mod­el and strat­e­gy. Income based on free.

  2. J T. Ramsay Avatar
    J T. Ramsay

    Here’s the thing about Google: search is an algo­rithm. It’s also the only real inter­net-based rev­enue stream. Own­ing a near monop­oly on that is a real asset. 

    Con­verse­ly, if you had a near monop­oly on music online, you’d prob­a­bly be broke. Hype Machine is the only thing I can think of that can pro­vide an on demand music expe­ri­ence and cir­cum­vent all the oth­er issues fac­ing any­one who’s run­ning a stream­ing music startup.

    If the music is free, then what oth­er prod­uct can the music indus­try sell to account for those loss­es. Adver­tis­ing isn’t the answer.

  3. Dubber Avatar
    Dubber

    1) When you say ‘the music indus­try’ — do you mean ‘the record business’? 

    Because the pre­sup­po­si­tion that there needs to be some­thing in place to save that is not nec­es­sar­i­ly true. If I was a bet­ting man, I’d put mon­ey on the clev­er­ness of the start­up entre­pre­neur tri­umph­ing over the greed of the record com­pa­ny exec. His­to­ry proves this prin­ci­ple over and over again. Refer Seth’s point about guilds: http://is.gd/liue

    2) Music’s not free. Record­ings of music are free. There’s an impor­tant dif­fer­ence that musi­cians and peo­ple who want to make mon­ey out of music online should take note of. Now, if that’s true — and I think to a large extent it is — then try­ing to be a major multi­na­tion­al com­pa­ny that makes mon­ey from the record­ings of music is a bit of a non-starter. Instead, it becomes a sig­nif­i­cant niche, where small­er play­ers can thrive.

    The prob­lem of how large record labels can make mon­ey if record­ings are free begs the ques­tion ‘Who says we have to live in a world where they do?’

    I have no prob­lem with those organ­i­sa­tions exist­ing and mak­ing mon­ey. I have a real prob­lem with that being the most impor­tant thing.

    3) Arring­ton’s right: the thing that makes stream­ing music ser­vices prob­lem­at­ic is the last ditch bit of greed from the old guard. They’re not inter­est­ed in mak­ing things sus­tain­able, they’re just try­ing to keep their jobs. But you’ll note he also says they’ll be back, cap in hand, pay­ing for place­ment in the streams of the ser­vices that end up sur­viv­ing their cur­rent onslaught.

  4. J T. Ramsay Avatar
    J T. Ramsay

    Here’s the thing about the pro­mo­tion­al gam­bit Arring­ton puts forth: stream­ing ser­vices aren’t pro­mo­tion­al because they don’t result in sales. I still don’t see how your free plan actu­al­ly makes mon­ey; instead of four mas­sive com­pa­nies los­ing mon­ey, I see count­less indi­vid­u­als los­ing their shirts try­ing to mar­ket to this niche. 

    I think you’ve also lost sight of the main prob­lem fac­ing the record busi­ness or the music indus­try or what­ev­er you’d like to call it: peo­ple don’t care about music as much as you think they do. There’s a rea­son music news has changed into either tech sto­ries or gos­sip. It’s because there’s no oth­er hook for music on its own, at least not at the moment. I’m work­ing on an edi­to­r­i­al plan to change that, but it’s what we have for now.

  5. Jason Herskowitz Avatar
    Jason Herskowitz

    I’ll say this on your last point… I find myself car­ing more about music now that prob­a­bly at any point in my life. But, I care less about the indi­vid­ual artists over time. I used to be a die-hard fan of cer­tain acts and would wait anx­ious­ly for the next release (fill­ing the void between releas­es by re-lis­ten­ing to their cat­a­log). Now, I find myself just find­ing new con­tent that I like well enough to be me sati­at­ed in my con­tin­u­al quest for good music.

    When I was younger I feel like I would lis­ten to an album for a year or more. Now, even an album that I con­sid­er great gen­er­al­ly does­n’t get played in heavy rota­tion in my ears for more than about a month. But, in aggre­gate I prob­a­bly lis­ten to music at least 5x than I used too.

  6. Brenda Walker Avatar
    Brenda Walker

    Jason describes the pro­file of a music “con­sumer” that has been fair­ly con­stant despite the roller coast­er ride the record­ing busi­ness has been on over the last 40+ years. Even at the height of CD sales, the aver­age active U.S. music con­sumer pur­chased 10 CD’s per year. The vast major­i­ty of music con­sumers have always been pas­sive about becom­ing “fanat­ics,” and they will like­ly con­tin­ue to be. 

    The chal­lenge in the new land­scape is how to gen­er­ate rev­enue from them and from peo­ple like Jason who is lis­ten­ing to music 5x as much as he used to. Clear­ly adver­tis­ing-based inter­ac­tive stream­ing (which is far more expen­sive to these com­pa­nies than non-inter­ac­tive stream­ing) is not the answer. Arring­ton wrote, “Their busi­ness mod­el doesn’t work and it is going to con­tin­ue to not work until the labels let it work.” If your prod­uct depends on some­one else “let­ting” it work, you don’t have a business.

    The report­ed death of the music busi­ness is like that quote from Mark Twain. An exag­ger­a­tion. The major labels have already begun tak­ing the orga­ni­za­tion­al shape of the pub­lish­ing side of the busi­ness-small­er oper­a­tions focused on licens­ing oppor­tu­ni­ties and acquir­ing rights they can exploit. 

    What is dying is the impe­tus for it to be con­trolled by pub­licly trad­ed or multi­na­tion­al cor­po­ra­tions that must make quar­ter­ly reports of their results, beat esti­mates and squeeze out unrea­son­able leaps of growth where their is none. The New York, Lon­don and Tokyo stock exchanges all took music for a ride dur­ing the extend­ed cycle inflat­ed by mass media such as music on tele­vi­sion (going back to Elvis and the Bea­t­les) and radio con­sol­i­da­tion, and then explo­sive cat­a­log sales with the for­mat change from vinyl to CD.

    Just as the vol­ume of music sold is reset­ting back to the lev­els before The Eagles’ Great­est Hits, Thriller, the Body­guard sound­track etc. when 500k in sales was con­sid­ered a hit, music com­pa­ny oper­a­tions are return­ing to small play­ers who are focused on under­stand­ing the poten­tial of the artists they work with and the cus­tomers who want to buy things because they are relat­ed to that artist. Call me a dream­er, but I think one of those things they buy will be some for­mat of music; it just won’t be the ubiq­ui­tous, val­ue­less mp3 file.

  7. Jason Gross Avatar
    Jason Gross

    JT, you’re much too smart to indulge in Lef­setz-type rants say­ing “the music indus­try is dead.” 

    The old mod­el is def­i­nite­ly dying but all of the peo­ple who bought the last Radio­head or Nine Inch Nails albums prove that there’s still plen­ty of folks out there will­ing to dish out mon­ey when they don’t have to. RH and NIN suc­ceed­ed not only because they were already name brands with a big fan base but also because music fans want­ed to sup­port their bold, enter­pris­ing efforts.

  8. J T. Ramsay Avatar
    J T. Ramsay

    It’s a dif­fer­ent sto­ry when you’re acute­ly aware of how many pageviews music dri­ves to a web­site com­pared to oth­er con­tent areas. I’m not sim­ply imag­in­ing how dif­fi­cult it is to get peo­ple excit­ed about music for its own sake. 

    RH and NIN seem big because they pulled off great PR stunt launch­es after their brands were built by major labels and MTV. What will they do for an encore? I think it’s telling that Reznor just plans on quitting.

  9. Brenda Walker Avatar
    Brenda Walker

    JT, no offense against Com­cast (except for the hor­ren­dous cus­tomer ser­vice) but are pageviews for that web­site real­ly a defin­i­tive mea­sure? As a past Com­cast cus­tomer, I nev­er under­stood what Comcast.net was try­ing to be. Music was the first form of media to be effect­ed by the “dig­i­tal rev­o­lu­tion” and if it has splin­tered from prop­er­ties that are gen­er­al inter­est (includ­ing Yahoo, AOL, MSN, etc.) is that real­ly so surprising?

  10. johan f Avatar
    johan f

    hi, i think there’s two very dif­fer­ent busi­ness mod­els here.

    1. The unknown act, who is look­ing to SPREAD.
    2. The estab­lished act who can do what he likes.

    I think FREEMIUM works to help spread ideas. it’s a mar­ket­ing tech­nique. if you already have a mas­sive audi­ence, then you can gen­er­ate more buzz by offer­ing your album for free, but that’s up to you.

    It’s the under­ground bands that can real­ly ben­e­fit from a freemi­um mod­el, and here is how:

    http://flapsandwich.blogspot.com/2009/03/does-freemium-work.html

  11. J T. Ramsay Avatar
    J T. Ramsay

    I think you raise a good point, Bren­da, but pageviews are still the bench­mark by which almost any web­site is judged. I take it as a mea­sure of how inter­est­ed peo­ple are in any­thing relat­ed to music. It’s a gripe com­mon among any edi­tors who are actu­al­ly deep-div­ing into Omni­ture on a reg­u­lar basis, with an eye toward site engage­ment goals. It’s a tricky business.

    I think you’re miss­ing some­thing impor­tant about the big por­tals though. They’re still a huge part of Inter­net traf­fic and are real hubs for lots of peo­ple. I per­son­al­ly am thrilled at the oppor­tu­ni­ty to take Comcast.net’s music page into the next gen­er­a­tion and try to reach dif­fer­ent audi­ences with vary­ing degrees of inter­est in music con­tent. As I see it, we have the eye­balls it takes to expose peo­ple to all sorts of music con­tent; it’s just a mat­ter of get­ting labels to see that they can’t ignore a site like Comcast.net just because it does­n’t have a foot­print in Los Ange­les or New York City. It’s just too big an oppor­tu­ni­ty to pass up!

  12. J T. Ramsay Avatar
    J T. Ramsay

    Thanks for the link, Johan. I think OK Go had great suc­cess, if only for a moment, with a viral piece of con­tent. The prob­lem is how do you chan­nel that excite­ment into a reli­able fan­base you can expect to see out at your shows? I haven’t heard a peep from OK Go since they appeared on “The Col­bert Report.”

  13. Mark Schoneveld Avatar
    Mark Schoneveld

    All big media is going through these same near-death grow­ing pains. At the end of the day, peo­ple will always make music, paint pic­tures, take pho­to­graph­ic images, edit togeth­er mov­ing pic­tures and sound. The fact is that the cost of cre­at­ing mass-pro­duced media is just get­ting low­er and low­er and over time and the val­ue of the ‘archive’ of that con­tent is falling rapid­ly. Rar­i­ty is the future. Or commodity. 

    I’m in the camp that says if the only way music will be heard is to give it away, then so be it. No more adver­tis­ing sup­port­ed any­thing. No more over-paid PR. No more wild­ly gouged tick­et prices. Just peo­ple. Play­ing instru­ments and singing. And shar­ing it, in what­ev­er form — live, home record­ing, what­ev­er — with their friends. Some folks actu­al­ly make a liv­ing at that. See: Aman­da Palmer.

    Then again, I hang out with a bunch of expe­ri­en­tial avant-garde folks who will prob­a­bly nev­er make a dime off their art any­way, so maybe that effects my opin­ion on the matter.

  14. Brenda Walker Avatar
    Brenda Walker

    JT, I get that the por­tals are big entry points for a lot of peo­ple, how­ev­er do those peo­ple actu­al­ly see the por­tals as gate­ways to their deep­er inter­ests? Or put anoth­er way, if I love indie rock, am I more inclined to trust Com­cast as my source for indie rock or Pitch­fork? As it relates to my online per­son­al­i­ty (or per­son­al brand), when I share a link on Face­book or tweet about find­ing some great music, what does it say about me as a music fan if that link comes from Com­cast, Pitch­fork (Pitch­fork isn’t based in LA or NY is it?) or the band’s site? 

    Could it be that the Com­cast brand is get­ting in the way? Is it pos­si­ble that the peo­ple who will go to Com­cast for music are more fol­low­ers than influ­encers and a part of the greater mass of casu­al music lis­ten­ers who are sim­ply more pas­sive anyway?

    Music has nev­er just been about the tunes them­selves and since the explo­sion of son­ic iden­ti­ty with ring­tones and per­son­al MySpace pages, it has becom­ing so much more than the sound­track to our lives. 

    As for OK Go, most hit sin­gles are from one hit won­ders. Reli­able fan­bas­es are built from great live shows and con­sis­tent­ly strong record­ings, not one atten­tion-grab­bing song, regard­less of how it got that attention.

  15. J T. Ramsay Avatar
    J T. Ramsay

    There’s a great post on Idol­a­tor that men­tions Palmer, and even she says there are real issues with this approach. I guess the hard­est thing to under­stand is how eas­i­ly we can com­mu­ni­cate via the Inter­net, yet all forms of media seem to be tak­ing a step back­ward to the 18th Century.

  16. J T. Ramsay Avatar
    J T. Ramsay

    Pitch­fork has had New York offices for at least two years. 

    Also, as con­cerns the Com­cast brand: I don’t think it gets in the way at all, but is more a mat­ter of get­ting pub­li­cists to under­stand, as I’ve writ­ten before, that there’s a tremen­dous oppor­tu­ni­ty to get their artists in front of huge audi­ence. When peo­ple are won­der­ing where they should look now that Blender has been rel­e­gat­ed to an online-only pres­ence, I want them to know that I’m look­ing to work with bands, pro­vid­ed that “work­ing with” means more than get­ting an mp3 to stream.

  17. Brenda Walker Avatar
    Brenda Walker

    So aren’t you in a bit of a chick­en and egg sit­u­a­tion? If pageviews aren’t great, why should they give you more than an mp3? If they give you exclu­sive con­tent will it deliver?

    It’s a shame that pub­li­cists are hold­ing Philly against you, but I must say that I don’t know many sea­soned music mar­keters who care where a com­pa­ny is locat­ed as long as it has some buzz and deliv­ers results. 

    When it comes to music, Com­cast does­n’t have buzz. I cer­tain­ly sup­port you in your dri­ve to change that, but I don’t think get­ting the con­tent alone isn’t going to be enough.

  18. J T. Ramsay Avatar
    J T. Ramsay

    Well, pageviews aren’t great com­pared to gen­er­al enter­tain­ment news, but com­pared to oth­er out­lets that are music-focused, my num­bers are the stuff of dreams! I start­ed out the year with two months of record-break­ing traf­fic for comcast.net/music!

    I guess I should’ve clar­i­fied that.

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